New Law Favors Lenders

Stuttgart apartment construction_Marijan Murat-dpa
Skies the legal limit?
  • Why it matters

    Why it matters

    Germany recently passed a new mortgage law intended to integrate national law with European mandates. But it seems to be heavily flawed, and will probably need an overhaul.

  • Facts


    • An estimated 13,000 new mortgages are issued to German borrowers every day.
    • Germany is undergoing a property boom, with house prices increasing 5.6 percent annually over the last five years, double the average annual increase since 1970.
    • A new German law to implement E.U. mortgage lending guidelines contains serious discrepancies.
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Within the European Union, Germany often plays the role of the stern superego, insisting that everyone plays by the rules. So it’s rather surprising that the country’s new law on mortgages appears to contravene E.U. regulations in several ways.

Though it was passed just two months ago, it already seems to need substantial revision. And this is no academic legal point, either. The country is in the midst of an unprecedented housing boom, with an estimated 13,000 new mortgage contracts signed every day. But not only are the new law’s deviations from E.U. law illegal, their burden also falls almost entirely onto the person taking out the mortgage, say consumer protection groups and members of the European parliament.

“The federal government has failed to correctly incorporate E.U. rules on mortgage loans into German law. They have treated consumer protection very shabbily indeed,” criticized Sven Giegold, a European parliamentarian with the environmentalist Green party who is planning to file a complaint to the E.U. Commission.

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